REVOCABLE LIVING TRUSTS

What is a revocable living trust?

A revocable living trust is a written agreement in which you, as the person creating the trust (also called "the settlor" or "the grantor"), appoint a person or a bank or a trust company as the trustee. The trustee agrees to follow the instructions in the trust agreement and to be responsible for managing and distributing the money and property that you put into the trust. The instructions describe how you want your assets managed during your lifetime and how you want your money and property distributed after you die.

What are the benefits of having a revocable living trust?

The most common reason for creating a revocable living trust is to avoid the expense and delay of the probate process. If you own real estate in several different states, placing the real estate in a trust can avoid having to go through multiple probates. A trust also provides a way for a successor trustee to assume responsibility for managing your assets if you become too ill or disabled to manage the assets yourself. If you become financially incapable and your money and property are not in a trust, a family member or friend may have to go to court to have a conservator appointed to manage your assets.

Are there disadvantages to having a revocable living trust?

A revocable living trust is more complicated to prepare and costs more than a will. The trust agreement only controls the investments, real property, and other assets that have been put in the name of the trust. After the trust is created, you have to transfer assets into the trust and make sure that assets you acquire in the future are registered in the name of the trust. You still need to have a "pour over" will so that any assets that did not get put into the trust during your lifetime can be added to the trust after you die and can be distributed according to your instructions. And your successor trustee will still need to have help from lawyers and accountants to administer the trust after your death.

Who becomes the trustee?

Often, the person creating a revocable living trust will name himself or herself as the first trustee. It is important to name at least one successor trustee to assume responsibility for the trust after you die or in case you become too ill or disabled to manage the trust yourself. The trustee can be a person or a bank or a trust company.

How much money or property has to be involved?

Whether a revocable living trust is appropriate for you will depend on your individual situation, including the amount of and the type of assets in your estate, whether you own investments or property with another person, and your plans for your future. Depending on what you own, there may be other cost-effective ways to avoid probate.

Does having a revocable living trust avoid probate?

A revocable living trust can avoid the probate process if you collect your assets and transfer them into the trust before you die. However, if you create a trust but you do not transfer your assets to the trustee before you die, there will still have to be a probate.

Does having a revocable living trust save on estate taxes?

If an estate may be taxable, a revocable living trust (or a will) can include provisions that will help to reduce or eliminate estate taxes. In Oregon, an estate is taxable if the value of the gross estate is more than $1,000,000 for a person who dies on or after January 1, 2006. For federal estate tax purposes, an estate is taxable if the value of the gross estate is more than $3,500,000 for a person who dies during 2009. Unless Congress acts to change the law, the federal estate tax will be eliminated for 2010, then reinstated in 2011 with an exclusion amount of $1,000,000.

Can a revocable living trust be changed?

If you create a revocable trust, you keep the right to cancel the trust and to take back all of the assets that have been put in the trust. You may also reserve the right to amend the trust agreement and to withdraw some of the assets from the trust. If you create an irrevocable trust, you will not have the right to cancel or to change the trust. Some trusts start out being revocable but become irrevocable if you become financially incapable. An irrevocable trust or a trust that can become irrevocable requires very careful planning.